Real Good Food Co. sees challenging EU sugar market

Real Good Food Co. sees challenging EU sugar market

Real Good Food Co. saw its share price plummet in early trade today (3 December) as weak sugar volumes hit first-half sales and earnings.

Shares in the UK sugar-to-ingredients group had fallen 14.18% at 09:30 (GMT), reflecting investor concerns over declining sales and operating profit.

In a regulatory filing, the company revealed first-half sales fell 5.6% to GBP130.1m (US$213.5m). The decline was attributed to lower sugar volumes for the contract season to end-September.

As Real Good Food Co. enters the new season, executive chairman Pieter Totté conceded the group is facing a "significant challenge" following the "dramatic" drop in EU sugar market prices.

However, he remained upbeat on the firm's ability to manage the situation. "Napier Brown's sales volumes, in both the industrial and retail markets have increased significantly from the start of the new contract season in October 2013. We anticipate our Whitworths sugar brand achieving a consumer sales value of more than GBP100m over the next 12 months."

In the six months to the end of September, EBITDA declined to GBP2.2m, down from GBP3m last year, due to an increase in investment to "support growth" and "brand strategy". Profit before tax dropped GBP1m, declining to GBP0.1m.

Concerns over the outlook for sugar prompted Shore Capital to lower its estimates for Real Good Food Co.'s annual profits. The brokerage cut its full-year PBT forecast by13% to GBP6.3m, reflecting "pressure on margins and the increased costs in servicing higher sugar volumes".

For the full regulatory filing from Real Good Food Co., click here